Financial Conduct Authority (FCA) chairman Charles Randell spoke about the regulator’s continuing fight against scams when he addressed the 37th Cambridge International Symposium on Economic Crime in early September 2019.
Mr Randell began by saying financial crime had reached “epidemic proportions”, and that many victims were individual consumers who had lost their savings to a scammer. He observed that the FCA needed to tackle investment fraud in order to meet two of its statutory objectives: protecting consumers and promoting market integrity. In view of this, he said the FCA was:
- Investing in intelligence and data analytics
- Increasing the number of staff involved in fraud prevention
- Raising public awareness of scams
- Supervising firms and taking enforcement action where appropriate
- Shutting down unauthorised firms, although the FCA cannot do this for firms based overseas
He then highlighted that the FCA believes that the actions of authorised firms who promote inappropriate investments to retirement savers are scarcely any more trustworthy than the criminals. Here Mr Randell referred to “financial firms which manufacture or promote poor value products to consumers” and that “some firms promote these products through incompetence, some through greed”. There have certainly been a number of individuals who have lost some or all of their retirement savings after being advised to transfer it into an alternative investment scheme, and the FCA has highlighted that five million people are potentially at risk of being duped by a pension scammer.
The FCA chair said that his organisation would continue to prosecute firms and individuals who break the law, but he observed that prosecutions take a long time and that only 3% of fraud cases reported to the police resulted in a criminal charge or summons. A 2017 National Audit Office report concluded that fraud was not a priority for a number of police forces. Mr Randell therefore believes that it is necessary to prevent fraud from occurring in the first place.
He highlighted the creation of the National Economic Crime Centre and the new Economic Crime Plan which calls for co-ordination of strategy and better information sharing between the Home Office, Serious Fraud Office, police forces, Action Fraud and the National Crime Agency.
The FCA has the power to impose fines and remove authorisations, but Mr Randell also mentioned some circumstances in which it could initiate prosecutions, including:
- Conducting business without authorisation
- Issuing unapproved financial promotions
- Making misleading statements in relation to some forms of investment
- Conducting fraudulent activities
However, Mr Randell said that it was difficult for the FCA to take action in many cases, either because the firm is based outside the UK, or the scam involves products that the FCA doesn’t regulate. On this topic he commented:
“We don’t regulate the issue of retail minibonds. We don’t regulate car parking spaces, hotel rooms, student accommodation, storage pods, forestry, land in the Cape Verde islands or any of the other get-rich-quick schemes which you will come across if you do a Google search for ‘high return investments”.
Mr Randell highlighted some of the changes that are being made in response to scams and questionable conduct by firms, including:
- The restriction on P2P investments
- The ban on pension cold calling
- The proposed ban on contingent charging when advising on pension transfers
- The obligation to offer non-advised drawdown customers a series of investment pathway options
Strategies Mr Randell suggested could be implemented in the future include:
- Providing more clarity about what is regulated by the FCA and what isn’t
- Imposing further restrictions on the promotion of risky investments
- Increasing the scope of the Financial Services Compensation Scheme coverage
- Changing the rules so that issuing financial promotions becomes an FCA regulated activity – although these promotions can only be issued by authorised firms, there is no need to obtain additional regulatory permissions in order to issue these
Mr Randell also called on internet service providers, search engines and social media firms to do more to stop scammers from using their services.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article